Problem Set 2
Name: __________________________________________

Problem Set 2 is to be completed by 11:59 p.m. (ET) on Monday of Module/Week 4.

1. The following table presents data for wages in the market for internet security professionals.
(HINT: in the labor market the roles are reversed. Those who want to hire labor are the demanders. The workers enter the work force providing labor to the market place so they are the suppliers.)
Wage
Quantity Demanded
Quantity Supplied
$50,000
20,000
14,000
$60,000
18,000
18,000
$70,000
16,000
22,000
$80,000
14,000
26,000
$90,000
12,000
30,000

What is the equilibrium wage? _$60,000_________________________
Now, consider this scenario: Due to an increase in the …show more content…
What problems might exist in determining this new, externality based, price?

People might not be able to afford the new prices if the external costs are included which may lead to the consumers to look for alternatives in power source. Some of these alternatives may include using more archaic versions such as firewood or coal, which may increase pollution. Or they might be lead to steal electricity or use the black market for alternative power source.

4. In the old days lighthouses were built along the coast to prevent ships from running aground on rocks in unfamiliar ports. By shining a beam of light over a port and guiding ships away from rocks, these vital buildings reduced the risk for ship captains and were generally considered to be extremely valuable resources. Curiously, lighthouses were almost always run and maintained by local governments. Explain in economic terms why private firms would not run a lighthouse.
A private firm would not run a lighthouse because it is considered a public good. The lighthouse is non-excludable since the private company cannot exclude anyone from using the lighthouse. It is also non-rivalrous since the quality does not go down if other ships or companies use the lighthouse. If a private firm built a lighthouse, eventually other businesses will use the lighthouse to travel to the port causing the private firm to be upset about the other firms taking advantage of its use. Since the private firm would not be